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Many within the United States and others abroad continue to question the United States’ role in the world. Understandably, Americans have grown wary of the country’s role in the world, some asking whether the U.S. still has the power and influence to lead the international community, while others question why the United States must still take on this seemingly singular responsibility. On the eve of a major speech by President Obama addressing these questions, Senior Fellow Robert Kagan released a new essay entitled, "Superpowers Don't Get to Retire: What Our Tired Country Still Owes the World," which was published in the latest edition of The New Republic. Kagan argued that the United States has no choice but to be “exceptional.”

On May 27, the Foreign Policy program at Brookings and The New Republic hosted an event to mark the release of the Kagan essay and in advance of President Obama’s address to the U.S. Military Academy at West Point. Kagan, a senior fellow in the Project on International Order and Strategy at Brookings, was joined by The New Republic's Leon Wieseltier and The Washington Post's Fred Hiatt.

After the program, the panelists took audience questions.

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With ongoing crises in Ukraine, Syria, and other regions of the world, U.S. global leadership is arguably as critical now as it has ever been. However, many question how the United States should exercise its leadership, what foreign policy agenda it should pursue, and how it should configure its military and security agencies going forward. In a recent speech at West Point, President Obama laid out his foreign policy agenda for the remainder of his presidency. While the Obama Administration will pursue the president’s agenda as laid out at West Point, others in Washington have different views on how best to manage U.S. foreign policy going forward.

On June 11, the Foreign Policy Program at Brookings will host Senator John McCain (R-AZ), former presidential candidate and member of the Senate Committee on Foreign Relations, for an address on the future of U.S. foreign and security policy. The address will be introduced by Brookings Senior Fellow and Director of Research for Foreign Policy Michael O’Hanlon, and the discussion following the Senator’s address will be moderated by Senior Fellow Robert Kagan.

After the program, Senator McCain will take audience questions.

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Editor's note: POLITICO Magazine released a list of the top 50 influential people in Washington, D.C., including Brookings Senior Fellow Robert Kagan and Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland, described as "the ultimate American power couple."

Victoria Nuland and Robert Kagan fell in love “talking about democracy and the role of America in the world” on one of their first dates. It’s a shared passion that hasn’t faded over time.

It was just two years ago that President Obama was gushing to aides about an essay that Kagan, a historian and author, wrote about the myth of American decline—a theme Obama echoed in his State of the Union that January. This year, Kagan’s sprawling New Republic essay, “Superpowers Don’t Get to Retire,” insisted on America’s enduring responsibility to shape the world order—and issued a direct challenge to a president who has summarized his own foreign-policy doctrine with a minimalist “don’t-do-stupid-s—t” directive. Obama promptly invited Kagan in for a West Wing consult, but it was also clear that Kagan had helped rouse the president’s Republican critics, who have been increasingly adopting Kagan’s argument that just because it’s been a decade of wearying war in Iraq and Afghanistan doesn’t mean America can roll up its superpower carpet and stay home when new crises, from Iraq to Russia to Syria, beckon.

Nuland, overseeing European and Eurasian Affairs at the State Department, has been a strong advocate of the engaged approach her husband favors as a crisis with Russia has unfolded on her diplomatic turf this year. The point was made, rather sensationally, in February, when a leaked audio recording of her F-bomb-laden diatribe about the fecklessness of the European Union, which she accused of not exactly playing a constructive role trying to end the growing conflict in Ukraine, appeared on the Internet. Nuland, a career Foreign Service officer, has been an impassioned advocate for democracy-building in Eastern Europe, and while she got pushback from European counterparts over her “f—k the EU” comment, the United States has been leading the effort to impose sanctions on Russia since President Vladimir Putin seized Ukraine’s Crimean Peninsula and waged a proxy war in the country’s east—dragging a reluctant Europe along pretty much every step of the way.

      

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The U.S.-led international order faces three simultaneous challenges—a rising power in East Asia, a declining but aggressive power in Eastern Europe and the unraveling of regional order in the Middle East. Left unchecked, events in Ukraine, the East China Sea and Iraq and Syria have the potential to seriously undermine an international system that has helped to guarantee peace and stability since the end of World War II.

On October 2, the Project on International Order and Strategy and the Center for 21st Century Security and Intelligence at Brookings co-hosted an event on these growing threats and the policies or strategy the United States needs to meet these challenges. The event brought together scholars from across the Brookings Foreign Policy Program with a range of regional and functional expertise.

The first panel focused on the range of threats the international order faces and whether (and how) the United States should prioritize these challenges and threats. The second panel asked whether the United States needs new regional strategies or a new grand strategy, how the United States can deter and rollback acts of revisionism and how the campaign against the Islamic State can fit into a broader Middle East strategy. Both panels sought to address the question of whether or not the United States can ultimately restore the international order to good health.

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On October 17, the Brookings Project on International Order and Strategy hosted a discussion with Brookings Senior Fellow Robert Kagan and MIT Professor Barry Posen on U.S. grand strategy. Amid a background of seeming geopolitical upheaval, the discussion focused on whether the United States should pursue a strategy that seeks to maintain U.S. pre-eminence and global leadership or whether the United States can or must adopt a more restrained posture.

In his May 2014 New Republic essay "Superpowers Don't Get to Retire," Kagan argued that the United States has an enduring responsibility and capacity to shape the world order.

Posen is the Ford international professor of political science and director of the security studies program at MIT. He is the author of the new book, Restraint: A New Foundation for U.S. Grand Strategy (Cornell University Press, 2014). Posen argues that consistent U.S. overreaching has led to numerous failures and unexpected problems and cannot be sustained. Posen urges the United States to adopt a strategy of restraint in the future use of U.S. military strength.

Brookings Fellow Jeremy Shapiro moderated the discussion.

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On October 17, the Brookings Institution’s Project on International Order and Strategy hosted two of the most prominent thinkers on American grand strategy to discuss whether Washington should remain forward-leaning in its posture, or if it should adopt a more restrained approach to global engagement.

The event was moderated by Brookings Foreign Policy Fellow Jeremy Shapiro, and featured a debate between Brookings Foreign Policy Senior Fellow Robert Kagan and Barry Posen, Ford International Professor at Massachusetts Institute of Technology.

Kagan argued that the United States has an enduring responsibility and capacity to shape the world order and must remain actively engaged abroad to prevent the international order from collapse. Posen, on the other hand, warned against American overreach in foreign policy and urged Washington to embrace restraint, focusing on its own national security interests and limiting engagement – particularly military - abroad.

In their discussion of the Middle East, both scholars sought to define American regional interests with greater precision. Posen argued that “affective” relationships, such as those with Israel, do not explain the U.S. defense budget dedicated to the region or contingency plans for the region. Posen also disputed the view that oil is the primary driver of U.S. regional policy, suggesting that threats to major suppliers could be managed with a less robust regional security commitment than Washington has traditionally maintained.

Kagan argued that President Obama is more intellectually inclined toward Posen’s strategy of restraint than most of his predecessors, and yet he too has been drawn into the Middle East. “It can’t just be pure stupidity that has had the United States involved in the Middle East as consistently as it has been for almost 70 years now, taking the place of the previous powers that had been involved in the Middle East,” he said.

Posen discussed U.S. efforts against the Islamic State group (also called ISIS or ISIL). He noted that President Obama’s rhetoric on ISIS has gone beyond what is prudent, describing the strategy as one of “containment that’s augmented by the promise of future counter-offensives and destruction.” Washington’s current strategy, Posen argued, has demobilized allies by enabling them to skirt responsibility for the crisis.

Posen and Kagan differed in their interpretations of the track record of American interventions in the region. Posen criticized American understanding of the causes and effects of intervention, saying that it is easier to oust a government than to generate internal consensus or transform a country into a stable democracy. By contrast, Kagan argued that the U.S. has never invaded a Middle Eastern country with the purpose of rearranging domestic politics.

There was little discussion of terrorism and nuclear proliferation, though Posen identifies these two threats as major items on which the U.S. should remain engaged. More information about Posen’s arguments can be found in his new book, Restraint: A New Foundation for U.S. Grand Strategy (Cornell University Press, 2014). Kagan’s argument for continued pre-eminence and engagement in grand strategy can be found in his influential May 2014 New Republic essay “Superpowers Don’t Get to Retire.”

      

For several years, President Obama has operated under a set of assumptions about the Middle East: First, there could be no return of U.S. ground troops in sizeable numbers to the region; and second, the United States had no interests in the region great enough to justify such a renewed commitment. The crises in the Middle East could be kept localized. The core elements of the world order would not be affected, and America’s own interests would not be directly threatened.

These assumptions could have been right, but instead they have proven to be wrong. The combined crises of Syria, Iraq, and the threat posed by the Islamic State (or ISIS) have not been contained. ISIS itself has proven both durable and capable, as the attacks in Paris showed. The Syrian conflict—with the resulting refugee flows—is destabilizing Lebanon and Jordan; it has put added pressure on Turkey’s already tenuous democracy; and it has exacerbated the acute conflict between Sunni and Shiite across the region. The multi-sided war in the Middle East has now ceased to be a strictly Middle Eastern problem. It has become a European problem, as well. The crisis on the periphery, in short, has now spilled over into the core.

Does this not call for a reassessment of the policies that have so far been tried in Syria and Iraq? Have not events in the Middle East, and now in Europe, reached the point where significant interests are at stake, thereby requiring a more substantial response by the United States?

Read Robert Kagan's more in-depth article on the subject in the Wall Street Journal.

       

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As President Obama's second term winds down and the 2016 presidential election draws ever closer, the United States finds itself involved in two wars and other global hotspots continue to flare. As is often the case, defense and national security will be critical topics for the next president. Questions remain about which defense issues are likely to dominate the campaigns over the coming months and how should the next president handle these issues once in office. In addition, with the defense budget continuing to contract, what does the future hold for U.S. military and national security readiness, and will those constraints cause the next president to alter U.S. strategy overseas?

On February 1, the Center for 21st Century Security and Intelligence at Brookings hosted an event examining defense and security options for the next president. Panelists included Mackenzie Eaglen of the American Enterprise Institute, Robert Kagan of Brookings, and James Miller, former undersecretary for policy at the Department of Defense. Brookings Senior Fellow Michael O’Hanlon, author of “The Future of Land Warfare” (Brookings Institution Press, 2015), moderated the discussion.

 

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Editors’ Note: The economic, political, and security strategy that the United States has pursued for more than seven decades is under attack by leading political candidates in both parties, write Ivo Daalder and Robert Kagan. But the United States plays an essential role in supporting the international environment from which Americans benefit greatly. This article originally appeared in The Washington Post.

The economic, political and security strategy that the United States has pursued for more than seven decades, under Democratic and Republican administrations alike, is today widely questioned by large segments of the American public and is under attack by leading political candidates in both parties. Many Americans no longer seem to value the liberal international order that the United States created after World War II and sustained throughout the Cold War and beyond. Or perhaps they take it for granted and have lost sight of the essential role the United States plays in supporting the international environment from which they benefit greatly. The unprecedented prosperity made possible by free and open markets and thriving international trade; the spread of democracy; and the avoidance of major conflict among great powers: All these remarkable accomplishments have depended on sustained U.S. engagement around the world. Yet politicians in both parties dangle before the public the vision of an America freed from the burdens of leadership.

What these politicians don’t say, perhaps because they don’t understand it themselves, is that the price of ending our engagement would far outweigh its costs. The international order created by the United States today faces challenges greater than at any time since the height of the Cold War. Rising authoritarian powers in Asia and Europe threaten to undermine the security structures that have kept the peace since World War II. Russia invaded Ukraine and has seized some of its territory. In East Asia, an increasingly aggressive China seeks to control the sea lanes through which a large share of global commerce flows. In the Middle East, Iran pursues hegemony by supporting Hezbollah and Hamas and the bloody tyranny in Syria. The Islamic State controls more territory than any terrorist group in history, brutally imposing its extreme vision of Islam and striking at targets throughout the Middle East, North Africa and Europe. None of these threats will simply go away. Nor will the United States be spared if the international order collapses, as it did twice in the 20th century. In the 21st century, oceans provide no security. Nor do walls along borders. Nor would cutting off the United States from the international economy by trashing trade agreements and erecting barriers to commerce.

In the 21st century, oceans provide no security. Nor do walls along borders. Nor would cutting off the United States from the international economy by trashing trade agreements and erecting barriers to commerce.

Instead of following the irresponsible counsel of demagogues, we need to restore a bipartisan foreign policy consensus around renewing U.S. global leadership. Despite predictions of a “post-American world,” U.S. capacities remain considerable. The U.S. economy remains the most dynamic in the world. The widely touted “rise of the rest”—the idea that the United States was being overtaken by the economies of Brazil, Russia, India and China—has proved to be a myth. The dollar remains the world’s reserve currency, and people across the globe seek U.S. investment and entrepreneurial skills to help their flagging economies. U.S. institutions of higher learning remain the world’s best and attract students from every corner of the globe. The political values that the United States stands for remain potent forces for change. Even at a time of resurgent autocracy, popular demands for greater freedom can be heard in Russia, China, Iran and elsewhere, and those peoples look to the United States for support, both moral and material. And our strategic position remains strong. The United States has more than 50 allies and partners around the world. Russia and China between them have no more than a handful.

The task ahead is to play on these strengths and provide the kind of leadership that many around the world seek and that the American public can support. For the past two years, under the auspices of the World Economic Forum, we have worked with a diverse, bipartisan group of Americans and representatives from other countries to put together the broad outlines of a strategy for renewed U.S. leadership. There is nothing magical about our proposals. The strategies to sustain the present international order are much the same as the strategies that created it. But they need to be adapted and updated to meet new challenges and take advantage of new opportunities.

The widely touted “rise of the rest”—the idea that the United States was being overtaken by the economies of Brazil, Russia, India and China—has proved to be a myth.

For instance, one prime task today is to strengthen the international economy, from which the American people derive so many benefits. This means passing trade agreements that strengthen ties between the United States and the vast economies of East Asia and Europe. Contrary to what demagogues in both parties claim, ordinary Americans stand to gain significantly from the recently negotiated Trans-Pacific Partnership. According to the Peterson Institute for International Economics, the agreement will increase annual real incomes in the United States by $131 billion. The United States also needs to work to reform existing international institutions, such as the International Monetary Fund, so that rising economic powers such as China feel a greater stake in them, while also working with new institutions such as the Asian Infrastructure Investment Bank to ensure that they reinforce rather than undermine liberal economic norms.

The revolution in energy, which has made the United States one of the world’s leading suppliers, offers another powerful advantage. With the right mix of policies, the United States could help allies in Europe and Asia diversify their sources of supply and thus reduce their vulnerability to Russian manipulation. Nations such as Russia and Iran that rely heavily on hydrocarbon exports would be weakened, as would the OPEC oil cartel. The overall result would be a relative increase in our power and ability to sustain the order.

The world has come to recognize that education, creativity and innovation are key to prosperity, and most see the United States as a leader in these areas. Other nations want access to the American market, American finance and American innovation. Businesspeople around the world seek to build up their own Silicon Valleys and other U.S.-style centers of entrepreneurship. The U.S. government can do a better job of working with the private sector in collaborating with developing countries. And Americans need to be more, not less, welcoming to immigrants. Students studying at our world-class universities, entrepreneurs innovating in our high-tech incubators and immigrants searching for new opportunities for their families strengthen the United States and show the world the opportunities offered by democracy.

Americans need to be reminded what is at stake.

Finally, the United States needs to do more to reassure allies that it will be there to back them up if they face aggression. Would-be adversaries need to know that they would do better by integrating themselves into the present international order than by trying to undermine it. Accomplishing this, however, requires ending budget sequestration and increasing spending on defense and on all the other tools of international affairs. This investment would be more than paid for by the global security it would provide.

All these efforts are interrelated, and, indeed, a key task for responsible political leaders will be to show how the pieces fit together: how trade enhances security, how military power undergirds prosperity and how providing access to American education strengthens the forces dedicated to a more open and freer world.

Above all, Americans need to be reminded what is at stake. Many millions around the world have benefited from an international order that has raised standards of living, opened political systems and preserved the general peace. But no nation and no people have benefited more than Americans. And no nation has a greater role to play in preserving this system for future generations.

       

The world order that was created in the aftermath of World War II has produced immense benefits for peoples across the planet. The past 70 years have seen an unprecedented growth in prosperity, lifting billions out of poverty. Democratic government, once rare, has spread to over 100 nations around the world, on every continent, for people of all races and religions. And, although the period has been marked by war and suffering as well, peace among the great powers has been preserved. There has been no recurrence of the two devastating world wars of the first half of the 20th century.

Today, however, that liberal order is being challenged by a variety of forces—by powerful authoritarian governments and anti-liberal fundamentalist movements, as well as by long-term shifts in the global economy and changes in the physical environment. The questions we face are whether this liberal world order is worth defending, and whether it is capable of surviving the present challenges. We believe the answer to both questions is an emphatic “yes.”

To say that a “liberal” world order is worth defending is, of course, a declaration on behalf of a certain set of principles—a belief that the rights of the individual are primary, that it is the responsibility of governments to protect those rights and that democratic government, in particular, offers the best chance for human dignity, justice and freedom. This is not a universally held view. The leaders of some nations and more than a few people around the world disagree on this hierarchy of values.

There is, and always has been, a division about how nations should be governed, and about the differences in and between democratic and autocratic forms, the role of religion and the connections to economic structures. While recognizing that these differences exist and that every structure has its failings, the authors of this report are confident in their conviction that the liberal world order offers the best hope for meeting human aspirations, both material and spiritual, and for calling forth the very best in people across the world.

To strengthen and preserve this order, however, will require a renewal of American leadership in the international system. The present world order has been forged by many hands and peoples, but the role of the United States in both shaping and defending it has been critical. American military power, the dynamism of the U.S. economy, and the great number of close alliances and friendships that the United States enjoys with other powers and peoples have provided the critical architecture in which this liberal world order has flourished. A weakening of America’s commitment or its capabilities, or both, would invariably lead to its collapse.

But in recent years, many have come to doubt America’s ability to continue playing this role. Only seven years ago, pundits were talking of a “post-American world” with a declining United States and a remarkable “rise of the rest”. These days, however, that prognosis appears to have been at least premature. The United States has substantially recovered from the Great Recession, while the once-heralded “rise of the rest” has stalled.

A new foundation for an effective U.S. foreign policy for a new international environment needs to be established, but it should be recognized that the United States is not omnipotent and faces limitations in what it can do. The emphasis must be on taking advantages of American comparative advantages in certain key areas, doing what the United States does best, and in a way that reflects what those around the world want and need from America.

To this end, this paper focuses on four baskets of policies—Strengthening and Adapting the Liberal Economic Order; Strengthening the International Security Order; Taking Advantage of the Energy Revolution; and Playing to America’s Strengths in Education, Innovation and Entrepreneurship.

A key task for American political leaders and policy advocates will be to demonstrate and explain how the pieces fit together: how trade enhances security; how military power undergirds prosperity; and how providing access to American education strengthens the forces dedicated to a more open and freer world. By looking at the whole picture, the importance of the individual strands of policy will be clearer and therefore easier to sell.

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On May 5, the Brookings Project on International Order and Strategy (IOS) hosted a discussion on America’s global role and the release of the newest edition of Pew Research Center’s series, “America’s Place in the World.” This survey explores American views of U.S. foreign policy today and the role of U.S. leadership abroad. The study also looks at which national security threats concern Americans the most.

Carroll Doherty, director of political research at Pew Research Center, opened the discussion by explaining the survey’s findings. Senior Fellow Robert Kagan, author of “The World America Made” (Vintage Books, 2013), talked about the implications of the survey for U.S. support of the international order. Derek Chollet, former assistant secretary of defense for international security affairs and author of the forthcoming book “The Long Game” (Public Affairs, 2016), offered insight into how these findings fit with President Obama’s worldview. Laure Mandeville, U.S. bureau chief for Le Figaro, contributed an international perspective on American politics and U.S. power abroad.

Margaret Brennan, CBS foreign affairs correspondent, moderated the discussion. Senior Fellow Thomas Wright, director of IOS, provided brief opening remarks.

After the program, the speakers took questions from the audience.

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On Thursday, June 2, U.S. Secretary of Commerce Penny Pritzker joined Senior Fellow Robert Kagan for a conversation on the economic dimensions of the liberal world order, including the critical economic opportunities on the global horizon and the role America’s private sector can play in helping shape modern commerce. They also discussed the importance of trade agreements to strengthening U.S. global competiveness. Suzanne Nora Johnson, vice chair of the Brookings Board of Trustees, moderated.

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Before the international Urban Age conference in Berlin, Bruce Katz argued that if cities are the organizing units of the new global order, then a broad range of policies and practices at the city, national, and supra-national levels need to be reevaluated and overhauled around new spatial realities and paradigms.

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Editor's Note: This article was the first published in the June 2008 World Cities Summit edition of ETHOS.

At the dawn of a new century, broad demographic, economic and environmental forces are giving American cities their best chance in decades to thrive and prosper. The renewed relevance of cities derives in part from the very physical characteristics that distinguish cities from other forms of human settlement: density, diversity of uses and functions, and distinctive design.

Across the United States (U.S.), a broad cross section of urban practitioners—private investors and developers, government officials, community and civic leaders—are taking ambitious steps to leverage the distinctive physical assets of cities and maximise their economic, fiscal, environmental and social potential.

A special class of urban interventions—what we call “transformative investments”—is emerging from the millions of transactions that occur in cities every year. The hallmark of transformative investments is their catalytic nature and seismic impact on markets, on people, on the city landscape and urban possibilities—far beyond the geographic confines of the project itself.

Recognising and replicating the magic of transformative investments, and making the exception become the norm is important if U.S. cities are to realise their full potential.

THE URBAN MOMENT
The U.S. is undergoing a period of dynamic change, comparable in scale and complexity to the latter part of the nineteenth century. Against this backdrop, there is a resurgence in the importance of cities due to their fundamental and distinctive physical attributes.

Cities offer a broad range of physical choices—in neighbourhoods, housing stock, shopping venues, green spaces and transportation. These choices suit the disparate preferences of a growing population that is diverse by race, ethnicity and age.

Cities are also rich with physical amenities—mixed-use downtowns, historic buildings, campuses of higher learning, entertainment districts, pedestrian-friendly neighbourhoods, adjoining rivers and lakes—that are uniquely aligned with preferences in a knowledge-oriented, post-industrial economy. A knowledge economy places the highest premium on attracting and retaining educated workers, and an increasing proportion of these workers, particularly young workers, value urban quality of life when making their residential and employment decisions.

Finally, cities, particularly those built in the nineteenth and early twentieth centuries, are compactly constructed and laid out along dense lines and grids, enhancing the potential for the dynamic, random, face-to-face human exchange prized by an economy fuelled by ideas and innovation. Such density also makes cities perfect agents for the efficient delivery of public services as well as the stewardship of the natural environment.

Each of these elements—diversity, amenities and density—distinguishes cities from other forms of human settlement. In prior generations, these attributes were devalued in a nation characterised by the single family house, the factory plant, cheap gas, and environmental profligacy. In recent history, many U.S. cities responded by making the wrong physical bets or by replicating low-density, suburban development—further eroding the very strengths that make cities distinctly urban and competitive.

Yet, the U.S., a nation in demographic and economic transition, is revaluing the quality of life uniquely offered by cities and urban places, potentially altering the calculus by which millions of American families and businesses make location decisions every year.

DELIVERING "CITYNESS": THE RISE OF TRANSFORMATIVE INVESTMENTS
Across the U.S., a practice of city building is emerging that builds on the re-found value and purpose of the urban physical landscape, and recognises that cities thrive when they fully embrace what Saskia Sassen calls “cityness”.¹

The move to recapture the American city can be found in all kinds of American cities: global cities like New York, Los Angeles and Chicago that lie at the heart of international trade and finance; innovative cities like Seattle, Austin and San Francisco that are leading the global economic revolution in technology; older industrial cities like Cleveland, Pittsburgh and Rochester that are transitioning to new economies; fast-growing cities like Charlotte, Phoenix and Dallas that are regional hubs and magnets for domestic and international migration.

The new urban practice can also be found in all aspects or “building blocks” of cities: in the remaking of downtowns as living, mixed-use communities; in the creation of neighbourhoods of choice that are attractive to households with a range of incomes; in the conversion of transportation corridors into destinations in their own right; in the reclaiming of parks and green spaces as valued places; and in the revitalisation of waterfronts as regional destinations, new residential quarters and recreational hubs.

Yet, as the new city building practice evolves, it is clear that a subset of urban investments are emerging as truly “transformative” in that they have a catalytic, place-defining impact, creating an entirely new logic for portions of the city and a new set of possibilities for economic and social activity.

We define these transformative investments as “discrete public or private development projects that trigger a profound, ripple effect of positive, multi-dimensional change in ways that fundamentally remake the value and/or function of one or more of a city’s physical building blocks”.

This subset of urban investments share important characteristics:

• On the economic front, transformative investments uncover the hidden value in a part of the city, creating markets in places where markets either did not exist or were only partially realised.
• On the fiscal front, transformative investments dramatically enhance the fiscal capacity of local governments, generating revenues through the rise in property values, the growth in city populations, and the expansion of economic activity.
• On the cognitive front, transformative investments redefine the identity and image of the city. They effectively “re-map” previously forgotten or ignored places by residents, visitors and workers. They create nodes of new activities and new places for people to congregate.
• On the environmental front, transformative investments enable cities to achieve their “green” potential by cleaning up the environmental residue from prior industrial uses or urban renewal efforts, by enabling repopulation at greater densities to occur and by providing residents, workers and visitors with transportation alternatives.
• On the social front, transformative investments have the potential, while not always realised, to alter the opportunity structure for low-income residents. When carefully designed, staged and leveraged, they can expand the housing, employment and educational opportunities available to low-income residents and overcome the racial, ethnic and economic disparities that have inhibited city performance for decades.

DISSECTING SUCCESS: HOW AND WHERE TRANSFORMATIVE INVESTMENTS TAKE PLACE
The best way to identify and assess transformative investments is by examining exemplary interventions in the discrete physical building blocks of cities: downtowns, neighbourhoods, corridors, parks and green spaces, and waterfronts.

Downtowns
If cities are going to realise their true potential, downtowns are compelling places to start. Physically, downtowns are equipped to take on an emerging set of uses, activities and functions and have the capacity to absorb real increases in population. Yet, as a consequence to America’s sprawling appetite, urban downtowns have lost their appeal. Economic interests, once the stronghold in downtowns, have moved to suburban town centres and office parks, depressing urban markets and urban value.

Across the US, downtowns are remaking themselves as residential, cultural, business and retail centres. Cities such as Chattanooga, Washington, DC and Denver have demonstrated how even one smart investment can inject new energy and jumpstart new markets. The strategic location of a new sports arena in a distressed area of downtown Washington, DC fits our definition of a transformative investment. Leveraging the proximity of a transit stop, the MCI Arena was nestled within the existing urban fabric on a city-owned urban renewal site. The arena’s pedestrian-oriented design strengthened, rather than interrupted, the continuity of the 7th Street retail corridor.² Today, the area has been profoundly transformed as scores of new restaurants, retail and bars dot the arena’s surroundings. Residents and visitors rely heavily on the nearby transit to come to this destination.

Neighbourhoods
Ever since the physical, economic and social agglomeration of “city” was established, the function of neighbourhoods has remained relatively untouched. While real estate values of neighbourhoods have shifted over time in response to micro- and macro-economic trends, a subset of inner city communities have remained enclaves of poverty. Victims of earlier urban renewal and public housing efforts, millions of people are consigned to living in neighbourhoods isolated from the economic and social mainstream.

Cities such as St. Louis, Louisville and Atlanta have been at the forefront of public housing (and hence neighbourhood) transformation, supported by smart federal investments in the 1990s. For example, the demolition of the infamous high-rise Vaughn public housing project in St. Louis enabled the construction of a new human scale, mixed-income housing development in one of the poorest, most crime-ridden sections of the city. This redevelopment cured the mistakes made by failed public housing projects, by restoring street grids, providing quality design, and injecting a sense of social and physical connection. Constructing a mix of townhouses, garden apartments and single family homes helped catalyse other public and private sector investments.

What made this investment transformative was that it included the reconstitution of Jefferson Elementary, a nearby public school. Working closely with residents, and with the financial support of corporate and philanthropic interests, the developer helped modernise the school, making it one of the most technologically advanced educational facilities in the region. A new principal, new curriculum, and new school programmes helped it become one of the highest performing inner city schools in the state of Missouri.

Corridors
City corridors are the physical tissue that knit disparate parts of a city together. In the best of conditions, corridors are multi-dimensional in purpose, where they are destinations as much as facilitators of movement. In many cities, however, corridors are simply shuttling traffic past blocks of desolated retail and residential areas or they have become yet another cookie cutter image of suburbia—parking lots abutting the main street, standardised buildings and design, and oversized and cluttered signage.

Cities like Portland, Oregon and urban counties like Arlington, Virginia have used mass transit investments and land use reforms to create physically, economically and socially healthy corridors that give new residents reasons to choose to live nearby and existing residents reasons to stay.

Portland conceived a streetcar to spur high density housing in close-in neighbourhoods that were slowly shedding old industrial uses. The streetcars traverse a three-mile route through residential areas, the water front, to the university. Since its construction, the streetcar has not only expanded transportation choices, it has helped galvanise new destinations along its route—including new neighbourhoods, retail clusters, and economic districts.

Parks and Open Space
City green spaces (such as parks, nature trails, bike paths) were initially designed to provide the lungs of the city and an outlet for recreation, entertainment and social cohesion. As general conditions declined in many cities, the quality of urban parks also declined, to the great consternation of local residents. Green spaces were turned into under-used, if not forgotten, areas of the city; or worse still, hot spots of crime and illegal activity. Such blight discouraged cities to transform outmoded uses (such as manufacturing areas) into more green space. In cities with booming development markets, parks failed to be designed and incorporated into the new urban fabric.

Across the US, cities are pursuing a variety of strategies to reclaim or augment urban green spaces. Cities like Atlanta, for example, have created transformative parks from outmoded economic uses, such as manufacturing land along urban waterfronts or by converting old railway lines into urban trail-ways.

Cities like Scranton have reclaimed existing urban parks consumed by crime and vandalism. This has required creative physical and programmatic investments, including: redesigning parks (removing physical and visibility barriers such as walls, thinning vegetation, and eliminating “dark corners”); increasing the presence of uniformed personnel; increasing the park amenities (such as evening movies and other events to increase patronage);³ and providing regular maintenance of the park and recreational facilities.⁴

Waterfronts
Many American cities owe their location and initial function to the proximity to water: rivers, lakes and oceans. Waterfronts enabled cities to manufacture, warehouse and ship goods and products. Infrastructure was built and zoning was aligned to carry out these purposes. In a knowledge-intensive economy, however, the function of waterfronts has dramatically changed, reflecting the pent-up demand for new places of enjoyment, activities and uses.

As with the other building blocks, cities are pursing a range of strategies to reclaim their waterfronts, often by addressing head-on the vestiges of an earlier era.

New York has overhauled the outdated zoning guidelines for development along the Brooklyn side of the East River, enabling the construction of mixed-income housing rather than prescribing manufacturing and light industry uses.

Pittsburgh and many of its surrounding municipalities have embarked on major efforts to re-mediate the environmental contamination found in former industrial sites, paving the way for new research centres, office parks and retail facilities.

Milwaukee, Providence and Portland have demolished the freeways that separated (or hid) the waterfront from the rest of the downtown and city, and unleashed a new wave of private investment and public activities.

WHAT IS THE RECIPE FOR SUCCESS?
The following are underlying principles that set these diverse investments apart from other transactions:

Transformative Investments advance “cityness”: Investments embrace the characteristics, attributes, and dynamics that embody “city”—its complexity, its intersection of activities, its diversity of populations and cultures, its distinctively varied designs, and its convergence of the physical environment at multiple scales. Project by project, transformative investments are reclaiming the true urban identity by strengthening aspects of the ‘physical’ that are intrinsically urban—be it density, rehabilitation of a unique building or historic row, or the incorporation of compelling, if not iconic, design.

Transformative Investments require a fundamental rethinking of land use and zoning conventions: In the midst of massive economic global change, 21st century American cities still bear the indelible markings of the 20th century. In the early 20th century, for example, government bodies enacted zoning to establish new rules for urban development. While originally intended to protect “light and air” from immense overbuilding, later versions of zoning added the segregation of uses—isolating housing, office, commercial and manufacturing activities from each other. Thus, transformative investments require, at a minimum, variances from the rigid, antiquated rules that still define the urban landscape. In many cases, examples of successful transformative investments have become the tool to overhaul outdated and outmoded frameworks and transform exceptions into new guidelines.

Transformative Investments require innovative, often customised financing approaches: Cities have distinctive physical forms (e.g., historic buildings) and distinctive physical visions (e.g., distinct districts). Yet private and even public financing of the American physical landscape, for the most part, is standardised and routinised, enabling the production of similar products (e.g., single family homes, commercial strips) at high volume, low cost and low quality. Transformative investments, however, require the marrying of multiple sources of financing (e.g., conventional debt, traditional equity, tax-driven equity investments, innovative financing arrangements, public subsidy, patient philanthropic capital), placing stress on project design and implementation. In addition, achieving social objectives often require building innovative tax and shared equity approaches into particular transactions, so that appreciations in property value can serve higher community purposes (e.g., creating affordable housing trust funds). As with regulatory frames, the evolution from exceptional transactions to routinised forms of investments is required to ensure that transformative investments become more the rule rather than the exception.

Transformative Investments often involve an empirically-grounded vision at the building block level: While a vision is not a necessary pre-requisite for realising transformative investments, cities that proceed without one have a higher probability of making the wrong physical bets, siting them in the wrong places, or ultimately creating a physical landscape that fails to cumulatively add up to “ cityness”. It is easy to find such examples around the country, such as isolated mega-projects (a new stadium or convention centre) or waterfront revitalisation efforts that constructed the wrong projects, having misunderstood the market and the diversifying demographic.

Telescoping the possibilities and developing a bold vision must be done through an empirically-grounded process. A visioning exercise should therefore include: an economic and market diagnostic of the building block; a physical diagnostic; an evaluation of existing projects; and the development of a vision to transform the landscape. From here, disparate actors (public, private, civic, not-for-profit) will have the best instruments to assess whether a physical project could meet specific market, demographic and physical needs—increasing its chances of becoming truly transformative.

Transformative Investments require integrative thinking and action: Transformative investments are often an act in “connecting the dots” between the urban experiences (e.g., transportation, housing, economic activity, education and recreation), which are inextricably linked in reality but separated in action. This requires a significant change in how cities are both planned and managed.

On the public side, it means that transportation agencies must re-channel scarce infrastructure investments to leverage other city building goals beyond facilitating traffic. It means that agencies driving a social agenda, such as schools and libraries, have to re-imagine their existing and new facilities to integrate strong design and move away from isolated projects.

In the private sector, it means understanding the broader vision of the city and carefully siting and designing investments to increase successful city-building and not just project-building. It means increasing their own standards by using exemplary design and construction materials. It means finding financially beneficial approaches to mixed income housing projects and mixed use projects instead of just single uses. In all cases, it requires holistic thinking that cuts across the silos and stovepipes of specialised professions and fragmented bureaucracies.

BUILDING GREAT CITIES
For the first time in decades, American cities have a chance to experience a measurable revival. While broader macro forces have handed cities this chance, city builders are also learning from past mistakes. After investing billions of dollars into city revitalisation efforts, the principles underpinning particularly successful and catalytic projects—transformative investments—are beginning to be clarified. The most important lesson for cities, however, is to embrace “cityness”, to maximise what makes them physically and socially unique and distinctive. Only in this way will American cities reach their true greatness.

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• ¹Saskia Sassen defined the term “cityness” to be the concept of embracing the characteristics, attributes, and dynamics that embody “city”: complexity, the convergence of the physical environment at multiple scales, the intersection of differences, the diversity of populations and culture, the distinctively varied designs and the layering of the old and the new. Sassen, S., “Cityness in the Urban Age”, Urban Age Bulletin 2 (Autumn 2005).
• ²Strauss, Valerie, “Pollin Says He’ll Pay for Sports Complex District, Awaits Economic Boost, Upgraded Image”, Washington Post, Thursday, 29 December 1994.
• ³Personal communication from Peter Harnik, Director, Center for City Park Excellence, Trust for Public Land, 6 June 2005.
• ⁴Harnik, Peter, “The Excellent City Park System: What Makes it Great and How to Get There”. San Francisco, CA: The Trust for Public Land, 2003. Available online at http://www.tpl.org/tier3_cd.cfm?content_item_id=11428&folder_id=175

      

Event Information

On February 2 and 3, 2010, the Brookings Institution Metropolitan Policy Program and Lazard convened leaders from the public sector, energy, infrastructure, finance and venture capital communities for an in-depth conversation focused on innovative policy and business practices that will help build the next American economy.

California Governor Arnold Schwarzenegger and Pennsylvania Governor Edward G. Rendell provided the keynote remarks. Both stressed the need for strategic investments in innovative infrastructure and energy practices going forward.

Framing the conference was the notion that the next American economy must be export-oriented, low carbon, innovation-fueled and opportunity rich—an idea which has been proposed by leading economists such as Director of the National Economic Council Larry Summers. It is with this mindset that Brookings and Lazard put together high-level, dynamic panels that centered around the private sector needs for building out the next American economy—and the policy implications. Specifically, they focused on how the traditional industry leaders (e.g., utility companies), the new industry leaders (e.g., venture capital investors), and public sector leaders can work together to move our country forward, especially within the metro areas where the resources and networks that drive innovation are rooted.

For media coverage of the event, please visit the following:

Time Is Running Out: The New York Times – Bob Herbert

Watching China Run: The New York Times – Bob Herbert

High Hopes for Clean-Energy Jobs: The Wall Street Journal - Rebecca Smith

Campaign for 'Next American Economy' Begins: San Francisco Chronicle - Andrew Ross

Bruce Katz, Vice President and Director, Metropolitan Policy Program, Brookings Institution		Vernon Jordan, Senior Managing Director, Lazard and California Governor Arnold Schwarzenegger
Wall Street Journal reporter Rebecca Smith leads a conversation with business leaders		Pennsylvania Governor Edward Rendell
Conference participants Jim Robinson of RRE Ventures and Michael Ahearn of First Solar		From left: Bob Herbert (New York Times), Mallory Walker (Walker and Dunlop) and George Bilicic (Lazard)

Video

• The Keys to American Competitiveness

Audio

• The Next American Economy: Transforming Energy and Infrastructure Investment

Transcript

• Transcript (.pdf)
• Bruce Katz's delivered remarks (.pdf)

Event Materials

• 0203_transcript
• 0203_nextecon_katz
• 0203_overview
• 0203_agenda
• 0203_nextecon_pres

      

Just weeks ago, Germany formally relinquished its title as the world’s top exporter to China. For 2009, China reported that its exports totaled $1.2 trillion as compared to Germany’s $1.1 trillion. The U.S. lost this title in 2003, when Germany surpassed our exports. What a difference a decade makes.

Even on the heels of their success, Germany has been cringing at the prospect of China surpassing them in total dollars generated by annual exports. In 2005, on the floor of the German Parliament, the state secretary for the Ministry of Transportation argued that Germany’s role in trade will slip without strategic, intermodal interventions to improve the movement of trade. His words highlighted the growing concern over the country’s competitiveness and conveyed that it was the federal government’s role to focus more intensively on freight. “There was a growing sense that freight was increasingly crucial to the country,” shared Johannes Wieczorek, head of freight transport and logistics for the Federal Ministry for Transport. Backed by Chancellor Merkel, Parliament voted overwhelmingly to support the development of a national strategy to strengthen the country’s logistics and freight. Less than two years later, Germany devised a national strategy that integrated all transportation modes, such as rail, roads, and waterways to accelerate the movement of freight across all parts of the country.

None of this was a minor accomplishment. In short order, the national government developed a strategy involving important stakeholders such as state and local leaders, ports, businesses, and environmental groups. 

The freight strategy, while vague on many details, outlines over 30 actions that signal where the federal government is headed: to shift more freight onto rail and waterways; to strengthen logistical gateways (such as ports) with more federal infrastructure money; and to increase funding for combined transport.

Germany’s National Port Concept is just one of these actions. It is essentially a list of priority ports that are to receive federal infrastructure investment funds given their national importance as trade gateways. Modeled after a similar effort for airports, both ports and airports will now use quantitative data to justify transportation funding. This empirically-driven process replaces a highly political one where earmarks are essentially designated by those in power. While it will clearly define who are the winners and losers, the Port Concept has sharpened federal decisionmaking on how and where to use transportation dollars wisely. Today, priority ports and airports will receive funding to create the best and most direct connections to high-speed railways and highways.

We could learn a great deal from Germany’s determination and focus. Although China surpassed Germany, a trend that was impossible to stave off in the long run, Germany is now well positioned to make sure they remain at the top of the list of the world’s top exporters. While we are just waking up to the reality that we need to increase our exports, as President Obama emphasized in his State of the Union Address, we have serious work in first improving our freight infrastructure to move our goods. Just a few days ago, U.S. DOT announced TIGER grants--funds largely focused on freight and ports. While a promising start, these grants are just a drop in the bucket in light of the level of investment needed. We would be wise to follow Germany and devise a national strategy to guide how and where to maximize every dollar for freight.

      

If you live in a city or suburb, chances are your regional government has tried to get your attention. Did you notice? Many of the issues your regional government is grappling with are actually important to you: the quality of the air you breathe, the quality of public transportation, the availability of green open space, and more.

As important as these issues are, I can almost guarantee that planners from your region have had to work extra hard to convince the press -- not to mention the citizens that live and work there -- to pay attention. The problem is, regional planning is about as exciting to the public as televised bowling and the press don’t seem to find the topic as newsworthy as it should be.

And then there is Paris. In one year, approximately a hundred articles and editorials on Grand Paris, a new regional effort, were printed in the city’s main paper, Le Monde. Grand Paris has also been covered by UK newspapers, such as the Telegraph and The Guardian, and by US newspapers, such as The New York Times and The Christian Science Monitor. In my interviews with Parisian architects, economists, and sociologists, they tell me that it’s not only the press that is paying attention. Ordinary citizens on the streets and cafes are talking about Grand Paris and Paris as a region.

So what happened?

Turns out, President Sarkozy created a political and media frenzy this past year when he announced his intention to design a new Paris that incorporates the suburbs. Looking at his effort from a socio-economic perspective, Sarkozy should be lauded for his effort to reconnect the isolated suburbs to the economic heart of Paris. The 2005 riots by African immigrants in some of these suburbs gave the world a real peek into some of the inequities found here.

His push has been to look past local political boundaries and acknowledge the new Paris that is emerging -- one that is both larger in geography and socio-economically more diverse. In 2007, the metropolitan area produced more than a quarter of France’s GDP, with a Gross Metropolitan Product of $731.3 billion.

Yet, his national government cites that Paris is underdeveloped in important sectors, and that the region’s economic growth has been slowing over the past two decades. Sarkozy also saw this as an opportunity to redefine the region in a post-Kyoto era, where sustainable development is no longer an afterthought.

Sarkozy retained 10 architectural teams with heavy hitters, such as Richard Rodgers, and asked them to “think big” on how to physically redefine the Paris region. In response, they offered lofty ideas for new economic centers, new high density housing hubs, and even a Paris covered with green roofs. For a moment, one could even argue that these teams breathed a new life of possibility for Paris. 

But politics is local—even when the French President is involved. 

As it turns out, Paris already has a plan for their region; one that was formally approved by the local jurisdictions and leaders and is now simply waiting for sign off by Sarkozy’s government. This plan addresses many of the issues Sarkozy argues that the region lacks, such as the need to address the 20 years of underinvestment in public infrastructure.

It also turns out that Grand Paris flies directly in the face of the regional coalition building effort under way. An important number of leaders that comprise the region’s 1,231 jurisdictions are already forging a common agenda on cross cutting issues such as transportation and economic development. These are just two of the several missteps that have made the idea turn sour.

So what seems to have started as a visionary act to physically remake the region has turned into a story on jurisdictional entanglements and hurt egos -- and the press ate it up. Interestingly, this controversy and all the press it generated has actually been an important win for regionalism in the end.

      

When President Obama unveiled his budget allocation for high-speed rail, he said, “In France, high-speed rail has pulled regions from isolation, ignited growth [and], remade quiet towns into thriving tourist destinations.” His remarks emphasize how high-speed rail is increasing the accessibility of isolated places as an argument for similarly investments. So, what’s the source of this argument in the European context?

In November 2009, the European Union’s ESPON (the European Observation Network for Territorial Development and Cohesion) released a report called “Trends in Accessibility.” ESPON examined the extent to which accessibility has changed between 2001 and 2006. ESPON defines accessibility as how “easily people in one region can reach people in another region.” This measurement of accessibility helps determine the “potential for activities and enterprises in the region to reach markets and activities in other regions.”

ESPON’s research concluded that in this five-year period, rail accessibility grew an average of 13.1 percent. The report further concludes that high-speed rail lines have “influenced positively the potential accessibility of many European regions and cities.”

In particular, the research found that the core of Europe--Germany, France, Belgium, the Netherlands, and Switzerland--has the highest potential accessibility. Europe’s core produces the highest levels of economic output and has the highest population densities. ESPON argues that with such densities, the core has found reason to link their economic hubs (cities) with high-speed rail. These are the places in Europe where they have the greatest returns on investment.

But ESPON also found that high speed rail is starting to increase the accessibility of isolated places such as France’s Tours, Lyon, and Marseille. This is a very important finding for Europe. They have a long-standing policy of social cohesion and balance, striving to create economic sustainability and population stability across Europe. The objective is for areas well beyond core to thrive economically and to dissuade people from migrating in search of jobs. Fiscally, social cohesion translates into investing disproportionately more money into areas not producing sufficient levels of economic output. High-speed rail is but one of the many strategies intending to produce “economic and social cohesion,” states a European Commission report on high-speed rail.

But we are not Europe. While their thesis underpinning high-speed rail is social cohesion, what is our underlying thesis for high-speed rail? And what does this look like spatially? What was the logic behind the selection of Florida over other possible corridors? Is this line going to strengthen our national economy and GDP? Clarity on this score will help ensure the project is a success and offers a high return on investment. Lessons from this accessibility study say that places with high population levels and GDP output offer the greatest accessibility and therefore success.

It would be a pity if the U.S. finally jumped on the high-speed bandwagon but still missed the train.

      

Even the most well-intentioned public policy can have unintended consequences. President Obama’s promise of doubling exports offers one thread of a broader strategy for getting our economy back on track.

Increasing our output of goods to ship and sell abroad implies that if all goes well, a growing number of goods will be transported to one of our 400 ports. Yet, as Rob Puentes has determined, our top 15 ports already move over 73 percent of the value of international freight. Increasing our exported goods means one of two possibilities: additional goods will be funneled to just a handful of ports or other ports will need to move international cargo.

And here is where the pain starts. Increasing port activities has real and often severe consequences for the cities, towns, and neighborhoods located nearby. The most immediate ramification is the increased volume in truck traffic on local roads and arterials. Back in 2005, the U.S. Department of Transportation surveyed 23 ports and found that 58 percent found local access to be below average conditions or, in other words, choked with congestion.

With more trucks carrying additional loads, some ports will likely find they have little choice but to push for port expansion to handle the supply. The process of local authorities approving port expansions is wrenching and emotional for the entire community--a controversy perhaps only superseded by the siting of jails.

If these costs seem reasonable to get our country back on track, try to argue this point to neighborhoods already burdened with these impacts. Accomplishing this national goal at the local level will not be so easy.

Yet, an easy answer for the feds is that they don’t have authority over local land use. This is also the case in Germany, where local land use decisions are determined by state and local governments. Yet on the issue of ports, Germany’s federal government has taken a keen interest in how local municipalities are supporting port activity. Their interest grew out of a desire to increase the volume of exports. In German cities and regions that contain “ports of national importance”, local municipalities will now be encouraged by the feds to change the hierarchy of land uses and activities within their zoning processes.

Specifically, local governments will be asked to consider how new uses, such as housing, will not hurt the competitiveness of the port. So instead of port noise needing to be mitigated by the port, homebuilders, and ultimately homeowners, could be responsible for mitigating the noise. One noise mitigation strategy is that homebuilders install heavy, noise-proof glass.

If the Germans should be lauded for at least trying to reconcile national economic objectives with local priorities, I wonder if more can be done than create neighborhoods of glass.

      

In partnership with the ESADE Business School and the City of Barcelona, the Metropolitan Policy Program planned and participated in three intensive days of learning in Barcelona in June 2011.  The focus of the session was to look at examples of strategies Barcelona, Spain and its greater metropolitan region is embracing to rebuild and re-invent their economies.  The goal is to share innovative ideas with U.S. metros engaged in similar initiatives as they face the challenge of moving to a new economic growth model.

This paper features brief synopses of the tours and meetings held with the City of Barcelona and the Catalonia Region on their economic development strategies.

Specific strategies include:

Barcelona Activa »

Barcelona Economic Triangle » (PDF)

22@Barcelona » (PDF)

Parc de l’Alba »

Click on any image below for a larger version

Barcelona Activa
The 22@Barcelona revitalization area	The Parc de l'Alba revitalization area

Downloads

• Download the Full Paper

      

Innovative activity and innovation districts are not evenly distributed across cities. Some metropolitan areas may have two or three districts scattered about, while other cities are lucky to have the critical mass to support even one strong district. London, however, a global city with nearly unparalleled assets, can best be understood as not just a collection of innovation districts but as a contiguous “city of innovation.” 

Our understanding of that innovative activity has taken a leap forward with the publication of a new report by the Centre for London called "Spaces to Think". Even for a paragon of innovation, a critique such as this is imperative if the city desires to maximize its assets while continuing to grow in a sustainable and inclusive manner. Much as we have recommended that urban leaders across the United States undertake an asset audit of their districts to identify key priorities, "Spaces to Think" focuses on 17 distinct districts, mapping their assets, classifying their typologies, and identifying governance structures.

The 17 study areas in "Spaces to Think"

The report provides lessons applicable to many cities.

Having identified, across all 17 districts, the three major drivers of innovative activity—talent, space, and financing—it becomes clear that the main hurdle for London, as a global magnet of talent and capital, is affordable physical space: “Increasing pressure for land…risks constraining London’s potential as a leading global city for innovation.” Similar to hot-market cities across the United States, many of the study areas of greatest promise are older industrial areas, such as Here East, Canary Wharf, and Kings Cross, where large plots of underutilized land have been reimagined as innovation districts. 

But who is prepared to undertake new regeneration projects? The report places significant responsibility on London’s many universities—whose expansions already account for much of the large-scale development opportunities in the city—for a “third mission” of local economic development. It is universities, the report notes, that are “devoting increasing amounts of money, resources, and planning to building new or redesigned facilities…pitched as part of a wider regeneration strategy, or the creation of an innovation district.” 

A second concern is the democratization of the innovation economy. Already a victim of rising inequality, London’s future growth must reach down the ladder. As we’ve argued, with intentionality and purpose, innovation districts can advance a more inclusive knowledge economy, especially given that they are often abut neighborhoods of above-average poverty and unemployment. Spaces to Think expands upon four key strategies: local hiring and sourcing practices for innovation institutions; upskilling of local residents through vocational and technical programs within local firms; increased tax yield, especially given recent reforms in which “local authorities retain 100 percent of business rates”; and shared assets and rejuvenation of place. This final lever requires inclusive governance that encourages neighborhood ownership of the public realm.

Finally, the report notes that, while there is much diversity of leadership in the study areas—some are university-led, some are entrepreneurial, some are industry-led—“good governance and good relations between institutions, are at the heart of what makes innovation districts tick.” This issue is at the heart of our work moving forward: identifying and spreading effective governance models that encourage collaboration and coordination between the public, private, and civic actors within innovation districts.

We are pleased that this future work will be strengthened by a new partnership between the Bass Initiative on Innovation and Placemaking and the Centre for London. The ambition of this Transatlantic Innovation Districts Partnership is to increase our mutual understanding of innovation districts found in Europe through additional qualitative and quantitative analysis and to integrate European leaders into a global network, all to accelerate the transfer of lessons and best practices from districts across the world.

       

How are two innovation districts in Stockholm successfully melding their tech and life science clusters to create new products?

What can the Wake Forest Innovation Quarter in North Carolina teach us about creating strong, vibrant, and innovative places?

How are innovation districts in Australia leveraging government policies and programs to accelerate their development?

Over the last year, members of the Anne T. and Robert M. Bass Initiative on Innovation and Placemaking team talked with hundreds of local leaders and practitioners advancing innovation districts in almost every global region. These conversations revealed the remarkable level of creativity and innovative, out-of-the-box thinking being employed to grow individual innovation districts.

In the course of our work, we have been intrigued by the question, is there value to be gained from a global network of innovation districts? To this end, we have reached out to successful global networks in Europe, the United States, and Asia to distill what it takes to make a strong and sustainable global network. Among our findings so far:

• Network members are solving on-the-ground challenges by talking with and learning from their peers. Several said that these horizontal exchanges are essential to leapfrogging ahead. 

• Online interaction is growing but network members say that face-to-face contact is critical. Comparing notes, asking questions, and engaging in conversations foster collaboration while maintaining a healthy dose of competition. 

• The right tools and supports can make all the difference. In networks where participants had full schedules, developing new ways to share intelligence, like early morning webinars or virtual conferences, regular e-newsletters, and simple methods to share data helped facilitate their learning. 

To what extent do you feel that a network of innovation districts might supercharge your own efforts and successes?

It would help our work tremendously if you could complete our on-line survey. It will take two minutes or less!

Editor's Note: If you're interested in receiving the latest news from the Bass Initiative, please sign up for our newsletter at this link, http://connect.brookings.edu/bass-initiative-newsletter-signup. Feel free to share it widely.

       

       

       

       

       

       

November's U.S. Bureau of Labor Statistics (BLS) employment report showed continued improvement in the job market, with employers adding 211,000 workers to their payrolls and hourly pay edging up compared with its level a year ago. The pace of job growth was similar to that over the past year and somewhat slower than the pace in 2014. For the 69^th consecutive month, private-sector payrolls increased. Since the economic recovery began in the third quarter of 2009, all the nation’s employment gains have occurred as a result of expansion in private-sector payrolls. Government employment has shrunk by more than half a million workers, or about 2.5 percent. In the past twelve months, however, public payrolls edged up by 93,000.

The good news on employment gains in November was sweetened by revised estimates of job gains in the previous two months. Revisions added 8,000 to estimated job growth in September and 27,000 to job gains in October. The BLS now estimates that payrolls increased 298,000 in October, a big rebound compared with the more modest gains in August and September, when payrolls grew an average of about 150,000 a month.

Average hourly pay in November was 2.3 percent higher than its level 12 months earlier. This is a slightly faster rate of improvement compared with the gains we saw between 2010 and 2014. A tighter job market may mean that employers are now facing modestly higher pressure to boost employee compensation. The exceptionally low level of consumer price inflation means that the slow rate of nominal wage growth translates into a healthy rate of real wage improvement. The latest BLS numbers show that real weekly and hourly earnings in October were 2.4 percent above their levels one year earlier. Not only have employers added more than 2.6 million workers to their payrolls over the past year, the purchasing power of workers' earnings have been boosted by the slightly faster pace of wage gain and falling prices for oil and other commodities.

The BLS household survey also shows robust job gains last month. Employment rose 244,000 in November, following a jump of 320,000 in October. More than 270,000 adults entered the labor force in November, so the number of unemployed increased slightly, leaving the unemployment rate unchanged at 5.0 percent. In view of the low level of the jobless rate, the median duration of unemployment spells remains surprisingly long, 10.8 weeks. Between 1967 and the onset of the Great Recession, the median duration of unemployment was 10.8 weeks or higher in just seven months. Since the middle of the Great Recession, the median duration of unemployment has been 10.8 weeks or longer for 82 consecutive months. The reason, of course, is that many of the unemployed have been looking for work for a long time. More than one-quarter of the unemployed—slightly more than two million job seekers—have been jobless for at least 6 months.  That number has been dropping for more than five years, but remains high relative to our experience before the Great Recession.

If there is bad news in the latest employment report, it's the sluggish response of labor force participation to a brighter job picture. The participation rate of Americans 16 and older edged up 0.1 point in November but still remains 3.5 percentage points below its level before the Great Recession. About half the decline can be explained by an aging adult population, but a sizeable part of the decline remains unexplained. The participation rate of men and women between 25 and 54 years old is now 80.8 percent, exactly the same level it was a year ago but 2.2 points lower than it was before the Great Recession. Despite the fact that real wages are higher and job finding is now easier than was the case earlier in the recovery, the prime-age labor force participation rate remains stuck well below its level before the recession. How strong must the recovery be before prime-age adults are induced to come back into the work force? Even though the recovery is now 6 and a half years old, we still do not know.

      

Editor’s note: The following remarks were prepared and delivered by Gary Burtless at a roundtable sponsored by the American Tax Policy Institute on January 7, 2016. Video of Burtless’ remarks are also available on the Institute’s website. Download the related slides at the right. 

We are here to discuss income inequality, alternative ways to evaluate its size and trend over time, and how it might be affected by tax policy.  My job is to introduce you to the problem of defining income and to show how the definition affects our understanding of inequality.

To eliminate suspense from the start: Nothing I am about to say undermines the popular narrative about recent inequality trends.  For the past 35 years, U.S. inequality has increased.  Inequality has increased noticeably, no matter what income definition you care to use.  A couple of things you read in the newspaper are untrue under some income definitions. For example, under a comprehensive income definition it is false to claim that all the income gains of the past 2 or 3 decades have gone to the top 1 percent, or the top 5 percent, or the top 10 percent of income recipients.  Middle- and low-income Americans have managed to achieve income gains, too, as we shall see.

Tax policy certainly affects overall inequality, but I shall leave it for Scott, David, and Tracy to take that up. Let me turn to my main job, which is to distinguish between different reasonable income measures.

The crucial thing to know is that contradictory statements can be made about some income trends because of differences in the definition of income.  In general, the most pessimistic statements about trends rely on an income definition that is restrictive in some way.  The definition may exclude important income items, items, for example, that tend to equalize or boost family incomes.  The definition may leave out adjustments to income … adjustments that tend to boost the rate of income gain for low- or middle-income recipients, but not for top-income recipients.

The narrowest income definition commonly used to evaluate income trends is Definition #1 in my slide, “pretax private, cash income.”  Columnists and news reporters are unknowingly using this income definition when they make pronouncements about the income share of the “top 1 percent.”  The data about income under this definition are almost always based on IRS income tax returns, supplemented with a bit of information from the Commerce Department’s National Income and Product Account (NIPA) data file.

The single most common income definition used to assess income trends and inequality is the Census Bureau’s “money income” definition, Definition #2 on the slide.  It is just the same as the first definition I mentioned, except this income concept also includes government cash transfer payments – Social Security, unemployment insurance, cash public assistance, Veterans’ benefits, etc.

A slightly more expansive definition (#3) also adds food stamp (or SNAP) benefits plus other government benefits that are straightforward to evaluate. Items of this kind include the implicit rent subsidy low-income families receive in publicly-subsidized housing, school lunch subsides, and means-tested home heating subsidies.

Now we come to subtractions from income. These typically reflect families’ tax obligations.  The Census Bureau makes estimates of state and federal income tax liabilities as well as payroll taxes owed by workers (though not by their employers).  Since income and payroll taxes subtract from the income available to pay for other stuff families want to buy, it seems logical to also subtract them from countable income. This is done under income Definition #4.  Some tax obligations – notably the Earned Income Credit (EIC) – are in fact subtractions from taxes owed, which would not be a problem in the case of families that still owe positive taxes to the government.  However, the EIC is refundable to taxpayers, meaning that some families have negative tax liabilities:  The government owes them money.  In this case, if you do not take taxes into account you understate low-income families’ incomes, even as you’re overstating the net incomes available to middle- and high-income families.

Now let’s get a bit more complicated.  Forget what I said about taxes, because our next income definition (#5) also ignores them.  It is an even-more-comprehensive definition of gross or pretax income.  In addition to all those cash and near-cash items I mentioned in Definition #3, Definition #5 includes imputed income items, such as: 

• The value of your employer’s premium contribution to your employee health plan;
• The value of the government’s subsidy to your public health plan – Medicare, Medicaid, state CHIP plans, etc.
• Realized taxable gains from the sale of assets; and
• Corporate income that is earned by companies in which you own a share even though it is not income that is paid directly to you.

This is the most comprehensive income definition of which I am aware that refers to gross or pre-tax income.

Finally we have Definition #6, which subtracts your direct and indirect tax payments.  The only agency that uses this income definition is principally interested in the Federal budget, so the subtractions are limited to Federal income and payroll taxes, Federal corporate income taxes, and excise taxes.

Before we go into why you should care about any of these definitions, let me mention a somewhat less important issue, namely, how we define the income-sharing group over which we estimate inequality.  The most common assessment unit for income included under Definition #1 (“Pre-tax private cash income”) is the Federal income tax filing unit.  Sometimes this unit has one person; sometimes 2 (a married couple); and sometimes more than 2, including dependents.

The Census Bureau (and, consequently, most users of Census-published statistics) mainly uses “households” as reference units, without any adjustment for variations in the size of different households.  The Bureau’s median income estimate, for example, is estimated using the annual “money income” of households, some of which contain 1 person, some contain 2, some contain 3, and so on.

Many economists and sociologists find this unsatisfactory because they think a $20,000 annual income goes a lot farther if it is supporting just one person rather than 12.  Therefore, a number of organizations—notably, the Luxembourg Income Study (LIS), the Organisation of Economic Cooperation and Development (OECD), and the Congressional Budget Office (CBO)—assume household income is equally shared within each household, but that household “needs” increase with the square root of the number of people in the household.  That is, a household containing 9 members is assumed to require 1½ times as much income to enjoy the same standard of living as a family containing 4 members.  After an adjustment is made to account for the impact of household size, these organizations then calculate inequality among persons rather than among households.

How are these alternative income definitions estimated?  Who uses them?  What do the estimates show?  I’ll only consider a two or three basic cases.

First, pretax, private, cash income. By far the most famous users of this definition are Professors Thomas Piketty and Emmanuel Saez.  Their most celebrated product is an annual estimate of the share of total U.S. income (under this restricted definition) that is received by the top 1 percent of tax filing units.

Here is their most famous chart, showing the income share of the top 1 percent going back to 1913. (I use the Piketty-Saez estimates that exclude realized capital gains in the calculation of taxpayers’ incomes.) The notable feature of the chart is the huge rise in the top income share between 1970—when it was 8 percent of all pretax private cash income—and last year—when the comparable share was 18 percent.  

I have circled one part of the line—between 1986 and 1988—to show you how sensitive their income definition is to changes in the income tax code.  In 1986 Congress passed the Tax Reform Act of 1986 (TRA86). By 1988 the reform was fully implemented.  Wealthy taxpayers noticed that TRA86 sharply reduced the payoff to holding corporate earnings inside a separately taxed corporate entity. Rich business owners or shareholders could increase their after-tax income by arranging things so their business income was taxed only once, at the individual level.  The result was that a lot of income, once earned by and held within corporations, was now passed through to the tax returns of rich individual taxpayers. These taxpayers appeared to enjoy a sudden surge in their taxable incomes between 1986 and 1988.  No one seriously believes rich people failed to get the benefits of this income before 1987.  Before 1987 the same income simply showed up on corporate rather than on individual income tax returns.

A final point:  The chart displayed in SLIDE #6 is the source of the widely believed claim that U.S. inequality is nowadays about the same as it was at the end of the Roaring 1920s, before the Great Depression.  That is close to being true – under this income definition.

Census “money income”: This income definition is very similar to the one just discussed, except that it includes cash government transfer payments.  The producer of the series is the Census Bureau, and its most famous uses are to measure trends in real median household income and the official U.S. poverty rate. Furthermore, the Census Bureau uses the income definition to compile estimates of the Gini coefficient of household income inequality and the income shares received by each one-fifth of households, ranked from lowest to highest income, and received by the top 5 percent of households.

Here is a famous graph based on the Bureau’s “median household income” series.  I have normalized the historical series using the 1999 real median income level (1999 and 2000 were the peak income years according to Census data).  Since 1999 and 2000, median income has fallen about 10 percent.  If we accept this estimate without qualification, it certainly represents bad news for living standards of the nation’s middle class. The conclusion is contradicted by other government income statistics that use a broader, more inclusive income definition, however.

And here is the Bureau’s most widely cited distributional statistic (after its “official poverty rate” estimate).  Since 1979, the Gini coefficient has increased 17 percent under this income definition. (It is worth noting, however, that the portion of the increase that occurred between 1992 and 1993 is mainly the result of methodological changes in the way the Census Bureau ascertained incomes in its 1994 income survey.)

When you hear U.S. inequality compared with that in other rich countries, the numbers are most likely based on calculations of the LIS or OECD.  Their income definition is basically “Cash and Near-cash Public and Private income minus Income and Payroll taxes owed by households.”  Under this income definition, the U.S. looks relatively very unequal and America appears to have an exceptionally high poverty rate.  U.S. inequality has been rising under this income definition, as indeed has also been the case in most other rich countries. The increase in the United States has been above average, however, helping us to retain our leadership position, both in income inequality and in relative poverty.

We turn last to the most expansive income definition:  CBO’s measure of net after-tax income.  I will use CBO’s tabulations using this income definition to shed light on some of the inequality and living standard trends implied by the narrower income definitions discussed above.

Let’s consider some potential limitations of a couple of those definitions.  The limitations do not necessarily make them flawed or uninteresting.  They do mean the narrower income measures cannot tell us some of the things that users claim they tell us.

An obvious shortcoming of the “cash pretax private income” definition is that it excludes virtually everything the government does to equalize Americans’ incomes.  Believe it or not, the Federal tax system is mildly progressive.  It claims a bigger percentage of the (declared) incomes of the rich than it does of middle-income families’ and especially the poor.  Any pretax income measure will miss that redistribution.

More seriously, it excludes all government transfer payments.  You may think the rich get a bigger percentage of their income from government handouts compared with middle class and poorer households.  That is simply wrong.  The rich get a lot less.  And the percentage of total personal income that Americans derive from government transfer payments has gone way up over the years.  In the Roaring 1920s, Americans received almost nothing in the form of government transfers. Less than 1 percent of Americans’ incomes were received as transfer payments.  By 1970—near the low point of inequality according to the Piketty-Saez measure—8.3 percent of Americans’ personal income was derived from government transfers.  Last year, the share was 17 percent. None of the increase in government transfers is reflected in Piketty and Saez’s estimates of the trend in inequality.  Inequality is nowadays lower than it was in the late 1920s, mainly because the government does more redistribution through taxes and transfers.

Both the Piketty-Saez and the Census “money income” statistics are affected by the exclusion of government- and employer-provided health benefits from the income definition. This slide contains numbers, starting in 1960, that show the share of total U.S. personal consumption consisting of personal health care consumption.  I have divided the total into two parts. The first is the share that is paid for out of our own cash incomes (the blue part at the bottom).  This includes our out-of-pocket spending for doctors’ charges, hospital fees, pharmaceutical purchases, and other provider charges as well as our out-of-pocket spending on health insurance premiums. The second is the share of our personal health consumption that is paid out of government subsidies to Medicare, Medicaid, CHIP, etc., or out of employer subsidies to employee health plans (the red part). 

As everyone knows, the share of total consumption that consists of health consumption has gone way up.  What few people recognize is that the share that is directly paid by consumers—through payments to doctors, hospitals, and household health insurance premium payments—has remained unchanged.  All of the increase in the health consumption share since 1960 has been financed through government and employer subsidies to health insurance plans. None of those government or employer contributions is counted as “income” under the Piketty-Saez and Census “money income” definitions.  You would have to be quite a cynic to claim the subsidies have brought households no living standard improvements since 1960, yet that is how they are counted under the Piketty-Saez and Census “money income” definitions.

Final slide: How much has inequality gone up under income definitions that count all income sources and subtract the Federal income, payroll, corporation, and excise taxes we pay?  CBO gives us the numbers, though unfortunately its numbers end in 2011.

Here are CBO’s estimates of real income gains between 1979 and 2011.  These numbers show that real net incomes increased in every income category, from the very bottom to the very top.  They also show that real incomes per person have increased much faster at the top—over on the right—than in the middle or at the bottom—over on the left.  Still, contrary to a common complaint that all the income gains in recent years have been received by folks at the top, the CBO numbers suggest net income gains have been nontrivial among the poor and middle class as well as among top income recipients.

Suppose we look at trends in the more recent past, say, between 2000 and 2011.  That lower panel in this slide presents a very different picture from the one implied by the Census Bureau’s “money income” statistics.  Unlike the “money income numbers” [SLIDE #9], these show that inequality has declined since 2000.  Unlike the “money income numbers” [SLIDE #8], these show that incomes of middle-income families have improved since 2000.  There are a variety of explanations for the marked contrast between the Census Bureau and CBO numbers.  But a big one is the differing income definitions the two conclusions are based on.  The more inclusive measure of income shows faster real income gains among middle-income and poorer households, and it suggests a somewhat different trend in inequality.

      

I came across an interesting chart in yesterday’s Morning Money tipsheet from Politico that struck me as a something that sounded intuitively correct but was, in fact, not. It's worth a comment on this blog, which has served as a forum for discussion of jobs numbers throughout the recovery.

Between last week’s BLS employment report and last night’s State of the Union, we’ve heard a lot about impressive job growth in 2015. For my part, I wrote on this blog last week that the 2.6 million jobs created last year makes 2015 the second best calendar-year for job gains of the current recovery.

The tipsheet’s "Chart of the Day," however, suggested that job growth in 2015 was actually lower-than-average if we adjust for the change in the size of the labor force. This is what was in the tipsheet from Politico:

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CHART OF THE DAY: NOMINAL JOB GROWTH — Via Hamilton Place Strategies: "Adjusting jobs data to account for labor force shifts can help shed some light on voters' economic angst, even as we see good headline statistics. … Though 2015 was a good year in terms of job growth during the current recovery and had higher-than-average job growth as compared to recent recoveries, 2015 actually had lower-than-average job growth if we adjust for the change in the size of the labor force." http://bit.ly/1OnBXSm

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I decided to look at the numbers.

The authors propose that we should "scale" reported job gains by the number of workers, which at first seems to make sense. Surely, an increase in monthly employment of 210,000 cannot mean the same thing when there are already 150 million employed people as when there are just 75 million employed people.

But this intuition is subtly wrong for a simple reason: The age structure of the population may also differ in the two situations I have just described. Suppose when there are 75 million employed people, the population of 20-to-64 year-old people is growing 300,000 every month. Suppose also when there are 150 million employed people, the population of 20-to-64 year-olds is shrinking 100,000 per month. 

Most informed observers would say that job growth of 210,000 a month is much more impressive under the latter assumptions than it is under the first set of assumptions, even though under the latter assumptions the number of employed people is twice as high as it is under the first assumptions.

BLS estimates show that in the seven years from December 2008-December 2015, the average monthly growth in the 16-to-64 year-old (noninstitutionalized) U.S. population was 85,200 per month. That is the lowest average growth rate of the working-age population going back to at least 1960. Here are the numbers:

Once we scale the monthly employment gain by the growth in the working-age population, the growth of jobs in recent years has been more impressive—not less—than suggested by the raw monthly totals. Gains in employer payrolls have far surpassed the growth in the number of working-age Americans over the past five years.

Headline writers have been impressed by recent job gains because the job gains have been impressive.

      

The pace of employment gains slowed in January from the torrid pace of the previous three months. The latest BLS jobs report shows that employers added 151,000 to their payrolls in January, well below monthly gains in October through December. In that quarter payrolls climbed almost 280,000 a month. For two reasons, the deceleration in employment gains was not a complete surprise. First, the rapid growth payrolls in the last quarter did not seem consistent with other indicators of growth in the quarter. Preliminary GDP estimates suggest that output growth slowed sharply in the fourth quarter compared with the previous two. Second, I see few indicators suggesting the pace of economic growth has picked up so far this year.

It’s worth noting that employment gains in January were far faster than needed to keep the unemployment rate from increasing. In fact, if payrolls continue to grow at January’s pace throughout the year, we should expect the unemployment rate to continue falling. As usual in the current expansion, private employers accounted for all of January’s employment gains. Government payrolls shrank slightly. The number of public employees is about the same as it was last July. Over the same period, private employers added about 213,000 workers a month to their payrolls. In January employment gains slowed in construction and in business and professional industries. Payrolls shrank in mining. Since mining payrolls reached a peak in September 2014, they have fallen 16 percent. Manufacturing payrolls rose slightly in January, but payroll gains have been very slow over the past year. Employment in the temporary help industry contracted in January. The industry has seen no net change in payrolls since October.

Average hourly pay in private companies edged up in January. The average nominal wage was 2.5 percent higher than its level 12 months earlier. This is a faster rate of improvement compared with what we saw earlier in the recovery, when annual pay gains averaged about 2.0 percent a year. The modest acceleration in nominal pay gains has occurred against the backdrop of slowing consumer price inflation. The combination has given workers real wage gains approaching 2.0 percent over the past year.

The BLS household survey showed a small drop in unemployment. The jobless rate fell to 4.9 percent, just 0.3 points above its average level in 2007, the last year before the Great Recession. The drop in unemployment was the result of a rise in the number of survey respondents who were employed. The labor force participation rate increased in January, and it has increased 0.3 points since October.

This rebound in labor force participation is modest compared with the drop that occurred between 2008 and 2015. From 2007 to January 2016 the adult participation rate fell 3.4 percentage points. Roughly half the drop is traceable to population aging, but the other half is due to factors related to the deep slump or to long-term factors that have affected Americans’ willingness to enter or remain in the workforce. If we assume all of the drop was due to factors that have temporarily discouraged jobless adults from seeking work, then we can recalculate the unemployment rate to reflect the rate we would see if all of these discouraged workers were reclassified as unemployed. That calculation suggests the current unemployment rate would be about 7.4 percent rather than 4.9 percent.

It is of course unlikely all the adults who’ve dropped out the labor force would stream back in if job finding got easier and real wages continued to rise. It is encouraging to see, however, that participation is now climbing after a long period of decline. Over the past four months, the labor force participation rate of 25-54 year-olds increased 0.5 percentage points.